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LinkedIn Sets Tone for Social Networks

By

John Letzing

February 10, 2012

LinkedIn Corp.'s
profit jumped 30% and its revenue more than doubled in its latest quarter, providing a lift to the young social-networking industry ahead of Facebook Inc.'s public offering later this year.

The professional social-networking service said its fourth-quarter net income rose to $6.9 million from $5.3 million a year ago, while revenue hit $167.7 million from $81.7 million a year earlier. Analysts had expected LinkedIn to report adjusted earnings of seven cents a share, and $160 million in revenue, according to Thomson Reuters data.

LinkedIn shares rose 6.7% in after-hours trading to $81.49. The results were driven by growth across the company's main lines of business, including strong online-advertising sales, continued progress for LinkedIn's higher-growth businesses that involve recruiting services, as well as charges for enhanced user accounts.

While LinkedIn's total costs and expenses more than doubled to $157.7 million from a year ago, that increase came in below some expectations, which helped boost profits.

A slower-than expected hiring pace helped ease LinkedIn's expenses. LinkedIn had suggested previously it would hire between 500 and 600 new employees in the period, though the company said Thursday it added only about 200.

However, LinkedIn also said it has already added more than 200 people in the current quarter, which will mark an unusually active hiring period. Overall, LinkedIn ended the fourth quarter with more than 2,000 employees.

The Mountain View, Calif., company began last year by filing for an initial public offering. When it went public last May, LinkedIn's stock more than doubled on the first day of trading, setting the tone for a Web frenzy for the rest of the year. Its debut was a harbinger of later public offerings from social gaming firm
Zynga Inc.
ZNGA -0.28%
and daily-deals site
Groupon Inc.
GRPN 0.23%

Last week, social-network Facebook also filed to go public, in debut set to be one of the largest IPOs in U.S. history.

LinkedIn's site went online in 2003 as a means for people to make work-related connections online. The site now counts more than 150 million members, according to figures disclosed Thursday.

For the quarter, revenue from LinkedIn's recruiting services more than doubled to $84.9 million. Revenue from users paying for enhanced accounts rose 87% to $33.3 million. The company's advertising revenue rose 77% to $49.5 million.

For the current quarter, LinkedIn said it expects revenue to be $170 million to $175 million.

William Blair analyst
Timothy McHugh
said LinkedIn's fourth-quarter expenses were actually a bit lighter than he anticipated and that growth in all of the company's three main units "delivered some nice upside" to profits.